Public
Bill Committee

Tuesday
17 May
2011

(Morning)

[Mr
James Gray in the
Chair]

Written
evidence to be reported to the
House

10.30
am

Clause
93

Benefit
cap

Kate
Green (Stretford and Urmston) (Lab): I beg to move
amendment 205, in
clause 93, page 61, line 40, at
end insert

‘excepting where
they are the parent(s) or principal carer(s) of a child who is the
subject of a child protection plan, a Children in Need assessment or
Common Assessment Framework Team Around the
Child’.

The
Chair: With this it will be convenient to discuss the
following: amendment 197, in clause 93, page 62, line 24, at end
insert—

‘(4A) Family and
friends carers will be exempt from the benefit
cap—

(a) where the child
comes to live with the carer as a result of plans made within a section
47 Children Act 1989 child protection
enquiry;

(b) where a child
comes to live with the carer following a section 37 Children Act 1989
investigation;

(c) where a
carer has secured a Residence Order or Special Guardianship Order to
avoid a child being looked after, and there is professional evidence of
the impairment of the parents’ ability to care for the
child;

(d) where the carer has
a Residence Order or Special Guardianship Order arising out of care
proceedings;

(e) where the
carer has a Residence Order or Special Guardianship Order following the
accommodation of a child;

(f)
where the carer has a Residence Order or Special Guardianship Order
following the death or serious illness of a
parent.’.

Amendment
206, in
clause 93, page 62, line 24, at
end insert—

‘(h) make
provision where there are parent(s) or principal carer(s) of a child
who is the subject of a child protection plan, a Children in Need
assessment or Common Assessment Framework Team Around the
Child.’.

Kate
Green: It is a pleasure to return to the Committee with
you in the Chair, Mr
Gray.

I
suspect that we will spend a large part of this morning’s
sitting, and perhaps some of this afternoon’s sitting, talking
about the Government’s proposed introduction of a benefit cap.
The more that we read about the Government’s plans, the more
that we see that the plans are both unworkable and discriminatory. My

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hon. Friend the Member for Westminster North looks forward to expounding
at length on issues related to family size and structure, housing
costs, employment status and so
on.

With
this group of amendments, I want to focus on two groups of families
that will be affected by the design of the cap. Amendments 205 and 206
address families in which there are child protection issues, and
amendment 197 addresses families with kinship care situations. Later
this morning, my hon. Friend will deal with the broader aspects, such
as housing, family size and so on, that particularly affect such
families.

I
will start with amendments 205 and 206, which address child protection
issues. There is considerable concern, as the Government have admitted,
that the welfare reforms encompassed within the Bill and the
earlier housing benefit reforms introduced by the Government will
result in increased housing mobility, as the value of the total income
of benefit claimants declines relative to the rents that they can
afford in the private rented sector, where they may be occupying
properties that will become unaffordable for
them.

In
addition to the contribution of material poverty to child neglect, the
evidence of a number of serious case reviews of children subject to
child protection issues shows that housing transience and inappropriate
housing, which the welfare reforms could exacerbate, contribute to such
neglect. Housing transience also makes it difficult for local
authorities to keep track of families in which children are at risk. We
can already see that in some London boroughs. The impact of housing
transience, particularly its implications for child protection, was
specifically highlighted by Lord Laming in his report on the death of
Victoria Climbié some years
ago.

I
am not for one minute stigmatising all poor families by suggesting that
they have a heightened risk of having child protection issues. Child
neglect and child abuse can occur across all family backgrounds, and
poor parents are in general as committed to the well-being and good
upbringing of their children as any parent. They care as deeply about
their child’s welfare as any parent from a better-off
background. None the less, we have to observe that the number of
incidents is sufficient to be concerned that child protection case
loads will increase in the poorest boroughs as vulnerable families
relocate, as a result of the benefit reforms, to boroughs with cheaper
housing stock.

The leader of
Haringey council, Councillor Claire Kober, is on record on that point.
She told The Guardian in October 2010 that flight to cheaper
boroughs as a result of reforms to local housing allowance had already
caused an inflow of children at risk. She
said:

“In
the last two months we have seen an influx of 40 children on child
protection plans. That’s more than a 10% rise for us in
vulnerable children…which means other services come under
pressure”.

That
was before the introduction of the new benefit cap that we are
debating. As a result of the benefit cap, there is a risk of difficult
and potentially dangerous child protection cases being concentrated in
certain parts of the country that have low-cost housing.

Research into
serious case reviews that were conducted between 2005 and 2007 found
that, in 45% of sample cases, the families were highly mobile and
living in poor conditions. The report
stated:

“Reluctant
parental co-operation and multiple moves meant that many children went
off the radar of professionals.”

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Family Action highlights
an example: family Q of Sheffield and Lincolnshire moved 67 times to
conceal three decades of parental sexual and physical abuse.

In London,
where rents are higher than elsewhere, there is an even clearer
indication of the link between housing issues and safeguarding
challenges. A London Safeguarding Children Board paper found that of
the serious case reviews that were completed in the capital between
2006 and
2009,

“47%
of the sample had rent arrears, had either been evicted or were
described as on the verge of
eviction”.

The
paper
concludes:

“Children
disappear from view when there is high mobility (including inter
country) and housing
problems.”

The
situation that we are moving to, in which families may be forced
repeatedly to move in search of affordable housing as a result of the
benefit cap, will exacerbate the problem and prevent the vital
safeguarding and tracking of vulnerable children and their parents.
High mobility contributed to the failure to trace and share information
between different London local authorities in the death of child C in
Sutton in 2006.

Charlie
Elphicke (Dover) (Con): I am listening to the hon.
Lady’s argument with care. My understanding is that the cap for
housing benefit will be about £500 a week or
thereabouts. Will she confirm that my understanding is correct and
explain how people would not manage to have quite substantial houses
for that kind of rent?

Kate
Green: The hon. Gentleman needs to understand that there
are two caps: one relates to housing size and the other to overall
benefits received. I think that the latter is the £500 a week
for families with children to which he has referred. Considerable
analysis of the impact of the Government’s earlier housing
benefit reforms and the cap proposals in the Bill suggests that a
substantial number of families with children will be unable to remain
in their current housing. That is particularly so in London, especially
in the high-cost London boroughs such as that represented by my hon.
Friend the Member for Westminster North, but it is true in other parts
of the country as well. For example, my borough, Trafford, has
relatively high housing costs in the north-west of England, so we
expect to see—both within and across boroughs—some
dislocation of families as a result of the
caps.

Charlie
Elphicke: Correct me if I am wrong, Mr Gray,
but I
believe—

The
Chair: Order. I will not be correcting
anyone.

Charlie
Elphicke: Indeed. I believe that we are talking about
£26,000 in rent each year, or thereabouts, which is an awful lot
of money. How many families will really be
affected?

Kate
Green: First, if a single child becomes at risk as a
result of these proposals and becomes the subject of child protection
arrangements that are more difficult to enforce, we must be seriously
concerned about that. Secondly, two caps are running. The benefit may
be capped by the size of a family and the number of

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bedrooms that they can have, as well as the financial cap that the hon.
Gentleman has alluded to. We are seriously concerned that such families
will face a total income cap of £500 a week, from which they
will have to meet housing and other costs. It will be very difficult
even for families with three children—such families are not
particularly large—to stay in the high-cost housing that some
occupy in some boroughs. That applies especially in London and in other
parts of the country, too, either because they are expensive parts of
the country, or because those families need relatively larger
accommodation.

As I have
said, high mobility will cause an increased risk for children, where
there are child protection issues. We can see that very clearly; it
happened in the case of child C in Sutton in 2006. In that case, the
extended family was known to five different local safeguarding children
boards, yet the mobility of the family impeded the sharing of vital
information. I am not for a minute suggesting that removing the benefit
cap would solve all the problems of information sharing across boroughs
for children who are the subject of child protection measures. We
should, however, think carefully about any benefit arrangements that
might create further mobility issues and further dislocation and
disconnection from the social services that need to have the closest
eye on vulnerable children. That is the thrust of amendments
205 and 206.

In August
2010, Ofsted found that

“in instances of
a failure to share information between schools and health
professionals, local authorities were unable to identify children under
their authority. As parents have no legal requirement to inform
professionals when they move into or out of a borough, it is often
through health professionals that children become known to local
authorities.”

However,
health professionals are also likely to lose contact with many such
vulnerable families as a result of the benefit cap.

When we have
raised concerns about families who will be harshly impacted by benefits
changes in the past, the Government have highlighted the role that
transitional protection will offer to vulnerable claimants. Although
that is welcome and useful in the short term, while it lasts, Ministers
have yet to tell us what will trigger the end of transitional
protection and what changes in circumstances will mean that it is no
longer in place. In any event, in the long term, transitional
protection will obviously not exist for families who are not currently
in the benefits system or for those who are not in receipt of any
relevant benefit. Only existing benefit claimants will be
protected.

Following the
introduction of universal credit, new claimants will receive no
protection, and they could lose substantially compared with their
entitlement under the existing system. From the briefing notes provided
by the Department, we now know that protection will not be uprated with
inflation. Losses could be relatively large under universal credit, and
benefits could be further eroded within only a few years. As I have
said, households whose circumstances change will lose their cash
protection, and what counts as a change in circumstances for those
purposes has not been defined in detail.

Amendments
205 and 206 seek to remove from the benefit cap those families where
child protection is an issue, and there are a number of variants
relating to how that issue could be defined by the administrative
processes.

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Ian
Swales (Redcar) (LD): I have a lot of sympathy with many
of the hon. Lady’s arguments. I will say more later in the
debate, but first, can she say how many families she thinks that the
amendments would affect? Secondly, is she not concerned that, if her
amendment were accepted, there would be a perverse incentive for
children somehow to be considered as vulnerable, either by authorities
or through the families’ actions? In other words, if it enables
someone to stay in a house, it is a good idea for the children to be
vulnerable. Does she not understand that that could be a perverse way
of gaming the system?

Kate
Green: I cannot give the hon. Gentleman the numbers, but I
will get back to him because it is a good question. However, the
numbers are relatively small; substantial numbers of families do not
have serious child protection issues, although the numbers have risen
in recent years in the wake of the Climbié report, as all hon.
Members are aware. That is already putting strain on local authorities,
as they have to take more children into care, or make them the subject
of child protection orders and assessment frameworks, and so on. I will
get the information that the hon. Gentleman seeks, because it is an
important question, but let us remember that child protection is no
issue at all for the vast majority of low-income parents. They are
good, caring and loving parents who put the well-being of their
children first, just as any parent
does.

On
the perverse incentive, the motivation to abuse children is a very dark
place, and it is difficult for us, as amateurs, to unpick what drives
such behaviour and what leads parents into patterns of abuse. I am
therefore not able to say that any current abuse has arisen as a result
of poverty. Indeed, I am explicitly not saying that any more than I can
say that building in some sort of financial incentive would have any
impact on parental behaviour. We cannot go into any rational analysis
of whether that is likely. We can say, however, that there is clearly a
coincidence between material depravation, child neglect and frequent
housing transience. With vulnerable children, who may need to become
the subject of child protection procedures, we need to do all that we
can to minimise those
risks.

10.45
am

Amendments
205 and 206 would, when child protection orders, assessment and so on
are in place, leave families outside the ambit of the cap. If the
Government are not able to accept those amendments, I hope that we will
at least receive assurances from Ministers about how they will ensure
that children do not fall down the gaps as a result of the introduction
of the benefits cap. I would also like assurances about what extra
support Ministers will be offering to those local authorities that are
already finding that their child protection and safeguarding services
are increasingly stretched, as a result of the rise in case load that I
have already mentioned, as well as the rise in case load that has
already taken place in some boroughs following housing benefit reform,
which we expect will now be
exacerbated.

With
regard to amendment 197, the other family group that I want to
highlight is those who provide kinship care to
children—relatives, grandparents, godparents and so
on—and might take them into their homes because those
children’s parents are unable to look after them properly. When
we discussed that group a few weeks ago, there was widespread support
and sympathy

Column number: 924

for the need to recognise the contribution that such families and family
members make, and to give them the support to enable them to care for
children in an environment where those children are likely to feel
safer and more stable, because they are with family
members—people who know and love them—and because they
relieve the state of the financial burden of providing such
care.

Amendment
197 would exclude the families and friends who are providing such care
from the ambit of the benefit cap. A failure to do so could lead to
some families being financially penalised specifically for taking on
that caring role, and I am sure that we would want to avoid that.
Inevitably, taking more children into a household will make it larger,
and family and friends carers often end up being members of large
households as a result of taking on not only one child, but perhaps
several siblings so that the family is kept together. That has led to
an estimated one in 10 family carers living in households of five or
more people, and they are therefore likely to be disproportionately
affected by the benefit cap. It is also more likely that those family
and friends carers may have to take time out of the labour market to
settle children who will be arriving under often quite distressing and
stressful circumstances, so they may be more reliant on a higher level
of out-of-work financial support for a time. In many cases, the
payments for the children will be coupled with their own out-of-work
benefits, which is likely to push them above the level of the
cap.

For
those households that already have their own children, the cap will act
as a disincentive to offer care to, and to take in, the children of
family and friends in distressing circumstances. If those people are
already just below the level of the cap, there will be a very real
effect on their inducement to take on children because they would
thereby risk losing financial support through the benefits
system.

We know
already that kinship carers highlight the financial disincentive that
is built into taking children into the household without getting all
the financial benefits that might accrue to their parents. The benefits
cap risks pushing a small number of families, albeit ones that we are
all agreed we should support, into a situation in which they are
significantly disadvantaged financially by offering care to the
children of family or friends. An unintended consequence could be that
more children will be taken into care because they cannot go to live
with family and
friends.

Even
if the Government cannot accept the amendment, I hope that they can
offer us some assurances about their intentions on supporting families
providing kinship care. We all recognise that such care is important
and valuable, and it is something that we want to see acknowledged. I
look forward to hearing the Minister’s comments on these two
groups of
families.

The
Minister of State, Department for Work and Pensions (Chris
Grayling): This is the first of what I suspect will be a
series of debates about the clause and the benefit cap. The hon. Lady
wishes to exempt certain households from the benefit cap through
amendments 197 and 205. Amendment 206 is more general and
indicates a desire to make special provision for such households when
making benefit cap regulations. The theme of writing exceptions into
the Bill is one to which we shall return as we consider in the next few
groups of amendments.

Column number: 925

First, I
should point out that subsection (4)(c) makes specific provision that
regulations may make exceptions to the application of the benefit cap,
which raises the obvious question about the circumstances in which
those exceptions should be made. I want to make it clear that given
that the provision is there, it is not my intention to write
specific exceptions into the Bill. I will be as helpful as I
can to Committee members, but I take them back to my
original comments about the nature of the Bill—and the bookcase,
which has not made an appearance for a while. The clause
simply creates a framework that allows a benefit cap to be
established. We are not specifying the detail, the amounts or the
exceptions. There will be a lot of debate about exactly how individual
situations such as the ones that the hon. Lady described should be
handled. The Bill simply creates the mechanics for all this to take
place.

Amendments
205 and 206 would apply to households when social care services had put
formal plans in place to secure a child’s safety and well-being,
often due to parental problems such as mental or physical health,
divorce, domestic abuse or substance abuse. Those issues
can clearly be hugely disruptive to families and children as
they grow up. In other families, such parental problems may lead to
another family member or a friend taking over the child’s care,
and that might happen for other reasons, such as the death of the
child’s parents. Those households are covered by amendment 197;
indeed, some households would be covered by all three
amendments.

We
recognise that the welfare of children whose parents are not always
willing or able to look after them appropriately has to be carefully
considered when policy making. In addition, we must acknowledge the
immense value of the care given by family and friend carers who look
after children whose parents are unable to provide the necessary care
themselves. It is important to reiterate that we are introducing the
benefit cap to increase incentives to work by addressing the injustice
of a benefits system that can sometimes give significantly more to
people who do not work than the average earnings of those who do. That
injustice not only is unfair to the workers who fund the system, but
fails benefit claimants by making the choice to take a job an illogical
one when their benefit income will not be matched. It also contributes
to the inappropriate stigmatisation of benefit claimants when people
who are in work look with frustration at those who are receiving more
than them through state
support.

It
is vital that we use the levers of the benefit system to make work the
natural choice. To achieve that, the benefit cap must apply to most
households, including those in which concerns about child welfare have
been registered. The presence of a child welfare concern should not
materially affect the way in which such families interact with the
benefit system. It is not a question of saying, “We’re
worried about the children, so let’s provide more money.”
The question is much deeper and more challenging than
that.

The
hon. Lady referred to the situation that exists now in which housing
mobility can lead to child protection
problems.

Ms
Karen Buck (Westminster North) (Lab): Does not the
Minister recognise that in child welfare cases, parents are almost
invariably required to attend regular sessions

Column number: 926

with social services during the working day—that is often part of
a court order? In such circumstances, how would that be compatible with
a work-search
requirement?

Chris
Grayling: We cannot deal with deep-rooted social problems
in a family by exempting them from the return-to-work path about which
we have talked extensively. How can it help a family with deep-rooted
problems if we do not try to help the parents get into work, which
would increase the money coming in and increase the family’s
purpose and direction in
life?

Sheila
Gilmore (Edinburgh East) (Lab): As I understand it, the
benefit cap will apply even if someone’s needs have been
assessed as requiring particular categories of benefits. People may
receive the allowance that is due to them as an individual or a couple,
which will include any child, disability or housing element. Is it
right to take money away from people when the system has decided that
they are entitled to that
money?

Chris
Grayling: The key point is that these households receive
substantial amounts. We are talking about households that receive the
average national income without going out to work. There is an
important point of principle here: our reform package is designed to
encourage and incentivise people into
work.

If
the hon. Lady reads subsection (4)(b), she will see that if there are
individual challenges and anxieties about individual
issues—about war widow’s benefit, to pick one
example—the Bill allows regulations
to

“make
provision as to the welfare benefit or benefits from which a reduction
is to be
made”.

The
Bill therefore clearly provides for the possibility of exceptions in
such circumstances. The benefit of our approach, as I have said about
other aspects of the Bill, is that it provides for freedom and
flexibility. If the country is unfortunate and misguided enough to vote
for a Labour Government in the future, that Government will have the
freedom to use the Bill’s flexibility to make any adjustments
that they
wish.

The
hon. Member for Stretford and Urmston referred to housing mobility and
how housing mobility can lead to child protection problems. I do not
deny that the benefit cap may result in individual cases of housing
mobility, but I do not believe that the measure will exacerbate and
existing problem. She described a situation under the current system in
which a household made 67 moves to cover up a child
protection issue. We should be extremely concerned about that, but it
is not a problem of our benefit system; it is a much broader problem of
how our social services interact with each other within and between
local authority areas. Of course, that sort of problem has to be
watched extremely carefully, but not including such households in the
benefit cap will not solve it. The problem has to be addressed in a
very different
way.

It
is vital that we use the levers of the benefit system to make work the
natural choice. To achieve that, the benefit cap must apply so that
people recognise that there is a point beyond
which they cannot simply receive money from the state. In that way, we
will use the wider advantages that come with moving into work to
address such concerns about social issues, rather than assume that they
are simply a question of benefit levels. I do not buy the argument that
those problems are a matter of

Column number: 927

benefit levels. They are much deeper rooted than that; they are policy
failures that exist outside the welfare
state.

I
now turn to the amendments. Some households in which children are cared
for by relatives or friends receive fostering allowance from the
child’s local authority to cover the cost that caring for the
child brings, but I am well aware that many more relative and friend
carers are not approved foster carers, so although they may receive
some payment from the local authority, they do not have access to
fostering allowance. That is clearly the group that the hon. Lady is
talking about. Such carers are able to receive support for the children
who are in their care through the benefits system, because, unlike
approved foster carers, they have access to child benefit and child tax
credit on the same basis as parents. Any payments they receive from the
local authority will be disregarded. That parity of treatment with
parents will be continued with the introduction of universal credit.
Where work-related requirements apply, the safeguards that are in place
for parents will extend to friends and family carers to take account of
their caring responsibilities.

11
am

If
we are to treat family and friend carers in the same way as parents for
other facets of the benefit system, it seems logical and appropriate
that that parity is extended to the application of the benefit cap. The
benefit cap principles apply to family and friend carers as they do to
parents, so it would not be appropriate to create an exemption as
amendment 197 proposes. If we did so, we might be in the absurd
position of not applying a benefit cap to a family with fewer children
than another to which the cap is applied. Surely, we have to deal with
individual circumstances differently; we should not simply say that
solely because someone has caring responsibilities for a child, they
should be given a blanket exemption from the benefit cap. I simply do
not accept that argument. However, the Bill provides the flexibility
for adjustments to be made to the benefit cap in regulations, so if
Opposition Members feel strongly about the matter, they can form and
pursue a policy decision if they
want.

Sheila
Gilmore: I understand the point that the Minister is
making about powers to make regulations and to change them, but am I to
understand that he is not inclined to make any of these groups an
exception in any circumstances? I am thinking, for example, of kinship
carers for a period when they first take over responsibility for
children; by definition, that is a difficult situation. Am I to
understand that when the Minister comes to draw up the regulations, he
will not be disposed to make any exceptions for any of the groups that
my hon. Friend the Member for Stretford and Urmston has highlighted
today?

Chris
Grayling: I am not persuaded by the hon. Lady’s
argument, although I understand the sincerity with which she makes it.
The current system, which allows friend and kinship carers to receive
child benefit and child tax credit in a way that other foster carers
would not, provides additional financial support for such families.
None the less, there is flexibility and we

Column number: 928

have not yet drawn up the detailed regulations. If Labour Members feels
strongly about the matter, the Bill provides the flexibility to make
such changes.

That brings
me to placing specific exemptions from the benefit cap in the Bill.
Throughout the Committee’s deliberations, I have explained that
we intend the Bill to be a framework for our welfare reforms,
with much of the detail to come in regulations, which is similar to the
approach used by the previous Government. The amendments propose a
series of exceptions to be written into the Bill, which we simply
cannot accept.

I understand
that hon. Members on both sides are concerned about getting the detail
right. We will be thoughtful, we will listen to the arguments put to
us, we will listen to the concerns and we will seek to make sure that
the policy is implemented in the best and most effective way possible.
However, I simply do not accept that the right way to go about that is
to write a series of specific exemptions for individual groups into
primary legislation, so with all due apology to the hon. Member for
Stretford and Urmston, I cannot accept the amendments. I assure her
that we will think carefully about the issues that she has raised,
because she has made some valuable points. I do not agree with her in
principle on kinship carers, but we will take note of the issues that
she has raised.

Kate
Green: I am disappointed by the thinness of the
Minister’s reassurances about two important and vulnerable
groups of families. If he is thinking so carefully, perhaps he should
consider the consequences of not having particularly well designed
arrangements for these families. Members on both sides of the Committee
are genuinely anxious about kinship care arrangements. He should be
mindful that the potential effect of what he has said this morning is
that fewer families will be able or willing to offer kinship care. I
hope that Ministers will keep that under careful review, so that if
that consequence flows from the policy that has been expounded this
morning, it can be revisited
immediately.

As
my hon. Friend the Member for Edinburgh East said, such situations
often occur quite suddenly. Families often have to make unexpected and
emergency arrangements, and I would expect the Minister to want at the
very least to facilitate such transitions. It is important to recognise
that kinship care may be a relatively short-term, stop-gap arrangement.
I hope that anything that reduces the propensity for children to be
taken away from their families for good and put into care, such as
providing shorter-term care within the family setting, is not damaged
by the policy to which the Minister seems so committed. I am
disappointed that he is so convinced that there is no reason to treat
families providing kinship care differently from other parents, when
clearly the situation is extreme and difficult and therefore very
different from the normal domestic family set-up. I should have liked
him to have shown a little more flexibility in his response.

The right
hon. Gentleman said that it was important to understand that the
overall purpose of the benefits cap is to make taking up employment the
prevailing norm—the issue that will trump every other in
determining the way in which the benefits system works. We have long
advocated that the paramount interests of children should be the
guiding principle in all aspects of public policy in which they are
involved, not just specifically in

Column number: 929

relation to children’s issues. I am really concerned that the
need to get parents into work takes precedence over their
children’s safety and
well-being.

There
will be some families where moving the parents into some paid
employment will help them to develop their parenting skills, but as my
hon. Friend the Member for Westminster North points out, many families
are already being required to comply with other conditions and
requirements, which will make moving into paid work particularly
challenging for them, and others are living in incredibly chaotic
circumstances. It is right to seek to move those families towards the
labour market over time, but for some of those chaotic families that
can be a very long time—years in some
cases.

The
Minister says he does not believe that child protection issues arise
out of the levels of benefits. I certainly am not suggesting that
poverty causes parents to abuse their kids—many parents on low
incomes would be horrified by the thought of such a thing—but he
has to accept that there is a correlation or a coincidence between
material deprivation and child neglect, and he needs to accept that
housing mobility will be increased by the reforms that the Government
are bringing in. Whether or not he thinks that will happen in many
cases and or that it is a new problem, Labour Members believe that we
will see a significant increase in housing mobility in certain parts of
the country. It will not be seen everywhere—we accept that in
some parts of the country it is not an issue; but where it is an issue,
I am concerned about the stretch on local authority social services and
children’s services. The right hon. Gentleman has been quite
cavalier about the potential
consequences.

I
am pleased to hear the Minister say that he understands the value of
families providing kinship care, and I noted what he said about the
ability, within regulations, to do more work to describe, very
particularly, families and households that we believe ought to be left
outside the scope of the benefits cap. We will give more consideration
to that when the secondary legislation is
laid.

I
am surprised by the Minister’s saying that he does not want to
start specifying families where there are child protection issues and
where there are kinship care arrangements, because he does not want to
specify lots detailed instances and examples, yet he is able to say
straightaway to my hon. Friend the Member for Edinburgh East that war
widows will be exempted. That seems like a differentiation between the
deserving and undeserving poor. I am therefore disappointed with the
right hon. Gentleman’s
answers.

Chris
Grayling: The hon. Lady obviously did not understand my
point. The clause contains provisions to decide which benefit should or
should not be included in the benefit cap as well as provisions for
exceptions to be made. Does she understand that those are different
things?

Kate
Green: The point is that the Minister is prepared to sign
up now to some families being treated in a particular way by the rules
on the benefit cap, but is prepared to deal with other families only
when we come to discuss regulations in detail a few months’
time. That sends a message about the kinds of families that will
receive exemptions from the benefit
cap.

Chris
Grayling: May I draw attention to the fact that there is
no reference to any individual benefit in the Bill? I have simply given
an example. No benefits or exceptions are given; it is purely a
framework.

Column number: 930

Kate
Green: I understand that, but we have heard from Ministers
several examples of the kinds of situation that might be exempt from
the cap. We also know that we are discussing—I think I am right
in saying—how families where disability is an issue or in
employment will not necessarily be encompassed within the cap, although
we have some questions about the extent of that, which my hon. Friend
the Member for Westminster North will raise later. My point is that the
Minister seems willing to say now that there are some kinds of family
structure and family type where he has some sympathy for a more
flexible interpretation of the benefit cap. I am concerned that he is
not able to make such positive statements about two groups of families
that I think merit such
flexibility.

I
am therefore disappointed, but we have many other questions about some
of the broader aspects of the benefits cap, such as incomes, family
structures and housing, which will give the Minister further
opportunities to offer us some broader assurances. Given that there is
an extensive list of such propositions that we want to raise today, I
beg to ask leave to withdraw the
amendment.

Amendment,
by leave,
withdrawn.

Ms
Buck: I beg to move amendment 232, in
clause 93, page 61, line 40, at
end insert—

‘(1A) The
Secretary of State shall not apply a benefit cap on a claimant’s
welfare benefits where the claimant has not received a reasonable offer
of a job, except in prescribed
circumstances.’.

The
Chair: With this it will be convenient to discuss the
following: amendment 244, in clause 93, page 62, line 15, at end
insert

‘including one for couples
with children who between them work more than a prescribed number of
hours.’.

Amendment
235, in
clause 93, page 62, line 25, at
end insert—

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for couples or a single person who
within a prescribed period has left work due to redundancy or illness
or reasons relating to the care of a
child.’.

Amendment
236, in
clause 93, page 62, line 25, at
end insert—

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for couples with dependent children who
if living in separate households would have benefit entitlements lower
than the relevant
amount.’.

Amendment
237, in
clause 93, page 62, line 25, at
end insert—

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for households where no adult is subject
to all work related requirements as defined in Clause
22.’.

Amendment
238, in
clause 93, page 62, line 25, at
end insert—

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for families who are worse off in work
once childcare costs are taken into
consideration.’.

Amendment
246, in
clause 93, page 62, line 25, at
end
insert—

‘(5A)
Regulations under this section must provide for an exemption from the
application of the benefit cap for any claimant in receipt of
disability living allowance, personal independence payment,

Column number: 931

attendance allowance, constant attendance allowance, employment and
support allowance, carer’s allowance, or any element or
sub-element of universal credit paid in respect of a
disability.’.

Ms
Buck: It is a pleasure to continue the debate under your
chairmanship, Mr Gray. We have begun to air some of the arguments about
the benefit
cap.

Political
history is littered with wheezes, emerging most commonly in political
conference speeches, and I would go so far to say that that is not
confined to one side of the Chamber. All too often, such wheezes, which
sound great in the context of a political speech, tend to unravel.
Picking up the bookcase analogy—the Minister has correctly not
aired that often enough—the benefit cap is like a garish coffee
table book given to one by a relative that one is then required to
display, despite the fact that it is something of an embarrassment.
From the political news commentary, which we know is often correct, we
learn that the benefit cap is not popular within the Department for
Work and Pensions, or with the Secretary of State or the Deputy Prime
Minister, and that negotiations are ongoing between the Treasury and
those Ministers to find ways to deal with the problem. They are
completely right to raise their concerns, because the problem with the
benefit cap is that it interacts in a destructive way with the
universal credit and will complicate greatly many other aspects of the
smooth transition into UC. It will have all kinds of perverse and
unintended consequences. The further we dig down into it, the more
obvious that
becomes.

11.15
am

It
is obviously true—the Opposition agree with this—that
work should always pay; that is the banal observation about the benefit
cap. But it is also true that, broadly speaking, when one looks at
comparable incomes for comparable household sizes the issue is not
nearly as stark as the Government would have us believe. With very few
exceptions, families of comparable size are better off in work than on
benefits. The central problem with the cap is that one is not comparing
like with like. I will return to
that.

If
one is living in Hull or Easington, some of the rents, which inform
this debate—slightly misleadingly, in the context of the overall
benefit cap—are eye-watering. One completely understands why
those figures shock and surprise people, but fortunately, good public
policy is not usually made on that
basis.

We
need to drill down into how the provision will work. As is so often
case, the impact assessments are brutally informative. We know how much
the Government want to save with the benefit cap, but we have no idea
how much it will cost. That is a particular challenge for Ministers.
The impact assessment tells
us:

“Housing
Benefit may no longer cover housing costs and some households may go
into rent arrears. This will require expense and effort by landlords
and the courts to evict and seek to recoup rent arrears. Some
households are likely to present as homeless, and may as a result need
to move into more expensive temporary accommodation, at a cost to the
local authority. It is not possible to quantify these costs because
they are based on behavioural changes which are difficult to
assess”.

So
we are able to quantify a cost, but we have no means of quantifying
what the Government’s offsetting expenditure will be. That is
before we even start to calculate the costs

Column number: 932

of moving people into work, because, broadly speaking, the households
that we are talking about will, in many cases, require more public
expenditure to move into work. I will address child care costs in a few
moments, but child care is one example of
that.

In
principle, the working tax credit in the transitional period into
universal credit, possibly with transitional protection, will in many
cases, particularly for lone parents with larger families, result in
higher expenditure. But at the moment we are flying blind. We do not
know what the costs are likely to be. As is the case with other
provisions in the Bill, we have no real confidence in the figures that
are being presented to
us.

We
also know who will be affected by the cap; it will almost invariably be
larger households. Approximately 40% of households affected by the cap
will consist of five or more children, and 80% will consist of three or
more children; fewer than 10% of households will have no children at
all. The impact assessment tells us that

“a large
proportion of those affected by the…cap are likely to
be…households from cultural backgrounds with a high prevalence
of large
families”.

The
Office for National Statistics
finds:

“Asian
households are larger than households of any other ethnic group.
Households headed by a Bangladeshi person were the largest of all with
an average size of 4.5 people in April 2001, followed by Pakistani
households…and Indian
households”.

People
from ethnic minority households, particularly certain groups, including
30% of Pakistani and Bangladeshi households, are more likely to be in
receipt of income-related benefits. The weighting is larger for
families, particularly for black and ethnic minority families. An
impact assessment says that it expects some

“60% of
customers”—

that
seems to be a singularly inappropriate use of the word
“customers”—

“who
are likely to have their benefit reduced by the cap to be single
females but only around 3% to be single men. Most of the single women
affected are likely to be lone
parents”.

Households
will lose £93 a week on average; the median loss will be
£66 a week. The mean is skewed by some households losing
significantly larger amounts, and such households will almost all be in
London. Some 40% of the losers will lose less than £50 a week;
25% will lose between £50 and £100 a week; 20% will lose
between £100 and £150 a week; and 15% will lose more than
£150 a week. The impact assessments set out dramatic figures
relating to who will be affected and by how much, but they do not dig
deeper into the Government’s thinking, which is what our
amendments, some of which are probing, seek to address. There are many
reasons why the policy is flawed.

Charlie
Elphicke: I am listening to the hon. Lady’s
argument carefully. Do the Opposition believe that there should be no
benefit cap whatever, as a matter of
principle?

Ms
Buck: I believe that it is absolutely right that
households should be better off in work. There will always be
exceptions, however, and there will be some individuals for whom the
work-search categories do not apply, which is a point that I will come
on to. As drafted, the cap is so flawed and so full of perverse
incentives that is really hard to see how it will operate at
all—still less operate and save the money on which the proposals
are predicated.

Column number: 933

The central
argument is one of comparability between working households and
households who are out of work and on out-of-work benefits. I will
return to this point in more detail, but the difficulty is that
people’s average earnings are used for comparison, not their
average income. In many cases, households who are on average earnings
are entitled to top-up in-work benefits, such as housing benefit,
council tax benefit, working tax credit and universal credit, so we are
not even beginning by comparing like with like. Centrally, there is
also no recognition of regional variations, particularly in housing
costs, which is the single biggest flaw in terms of the scale of the
money that is involved. It is, of course, impossible to make a
meaningful comparison between households in work in Easington and Hull
and households in work in London, because there is an enormous
disparity in housing costs, through no fault of theirs. I will return
to that point
later.

Charlie
Elphicke: My constituency of Dover is less likely to be
directly affected, but my constituents rail at me, asking why people
should earn more on benefits than they do when they are in work.
Surely, it is right in principle that the effective earnings equivalent
of £35,000 should be a cap, to deal with the level of public
concern that there is.

Ms
Buck: The hon. Gentleman is absolutely right that people
are shocked by rent levels, but rent levels are what they are. I will
come on to this matter in later amendments, but people with the lowest
possible housing costs are also affected by the cap. That point has not
been particularly worked through. People expect households to be better
off in work than out of it. That is absolutely right, but even the
existing system’s harshest critic would have to recognise that
there are differences in housing costs in different parts of the
country, and that should be reflected in the benefits system.

It is
reflected in the benefits system, of course—in housing benefit.
A few weeks ago in Parliament, we debated the housing benefit cap,
which is being levered down. We think that is happening more harshly
and faster than necessary, but those measures are predicated on a
recognition that there are variable housing costs in different parts of
the country. On one hand, therefore, the housing benefit reform that we
are charging ahead with recognises local variations in housing costs,
but that is not recognised in the benefit cap, which is a fundamental
flaw.

It has become
clear from further scrutiny of the cap that the main risk element for
the cap applying is having a larger family. In effect, it is a
back-door attempt to reduce benefit for those families with larger
numbers of children. Such families already face the highest risk of
falling into poverty. No one has properly explained how applying a cap
to families with larger numbers of children will have a significant
behavioural effect. What do we do about those families who are left in
that situation through no fault of their own: people who are widowed,
abandoned or severely ill?

The measure
introduces the ultimate in couples’ penalties. It would be
extraordinary for two rational individuals whose combined income in
out-of-work benefits would leave them subject to the cap, not to seek
to form separate households. Not all of them would do so because there
are many other factors at play, but why, logically, should we have a
benefits system that creates

Column number: 934

an incentive for households to separate, which will not only have a
devastating effect on that family but increase
expenditure?

Why
have the Government no confidence in all of the other measures that are
being introduced through universal credit and other benefit changes and
employment changes leading up to the introduction of universal credit?
We already have a sanctions regime. We already have a commitment to the
Work programme. We already have a programme of measures that are
designed to tackle worklessness and the Government are extremely
positive about its impact. If the Government are so convinced about the
Work programme and the fundamental thrust of universal benefit to
improve the income of households out of work, why do we need to
introduce yet another entirely arbitrary measure that cross-cuts all of
this?

Charlie
Elphicke: The hon. Lady asks why we should introduce such
a measure. The answer is because of the level of public concern. Half
of the hon. Lady’s own voters support the introduction of a cap;
78% of Liberal Democrat voters support the introduction of such a cap,
as do 94% of Conservative voters. Overall that is 72%. That is nearly
consensus in opinion polling land. In Parliament we represent people,
and we should listen to them and serve our constituents and engage in
their concerns. This is a lot of money to be
capped.

Ms
Buck: It is not a lot of money for the cap. The hon.
Gentleman’s earlier intervention implied that he was slightly
confusing the housing benefit cap with the universal cap. This cap does
not only apply to housing costs. I completely understand that public
opinion is shocked and surprised by high rents. That does not
necessarily mean that a particular measure that deals with that public
concern will work, let alone save money and let alone not have all
kinds of unintended consequences that the public do not like either. We
are all the same. We all want several contradictory things at the same
time. There are consequences here that will cause a great deal of
concern.

The nastiest
dimension to the benefit cap is the fact that there is almost no way
for many of these larger families to avoid its impact. One obvious
reason—the Minister will tell me if I am wrong—is that
around 5,000 of the 50,000 households who are currently assumed to go
into the benefit cap are currently in work-search groups. That number
may increase. It is possible that as income support fades out into
universal credit and the assessment of incapacity benefit is rolled
out, there will be an increase. None the less the majority of
households currently covered are not in work-search groups. So there is
another series of perverse
consequences.

We
had a debate earlier about the exemption of families whose children are
under five. The Minister confidently asserted that work search would
not be expected to apply to households with children under five. But
the benefit cap, as currently constituted, requires such households to
be included. The other, larger problem is that we know from the way
that the benefit cap interacts with the total income of a household in
terms of child benefit, child tax credit and so on, that the impact
will be predominantly on people’s housing
choices.

We are
indebted to Ferret Information Systems for some of the analysis that
has been done on way that the measure will apply to families. For
larger families, such

Column number: 935

as a single parent with five children, if that family is not to dig into
their child tax credit and child benefit in a way that significantly
lowers the disposable income available to spend on the children, there
will not be a single private sector property of an appropriate size
anywhere in England that they can move into—at proposed levels
of local housing allowance and subject to the reductions that the
Government are already applying—without facing a
shortfall.

11.30
am

I
cannot believe that the Government intend to leave households, which
will be unable to cover their rental costs and would, therefore, need
to move into cheaper accommodation—moving to cheaper
accommodation is constantly repeated as being one of the purposes of
the Government’s agenda—in a position whereby there is
nowhere in the whole country that they could move to. The model example
that Ferret Information Systems gives is that the lowest local housing
allowance figure for a four-bedroom house in England is in the broad
rental market area of Bradford and south dales, and, factoring in
council tax and housing benefit there, a family would find that their
benefit was still capped by £25 a week. If the family are unable
to work, for all kinds of reasons, including long-term sickness or the
fact that the children are under-five, they cannot take averting
action. They will not be able to find a property in the private rented
sector anywhere in England that they could rent without leaving them
below the minimum income that the Government have stated—they
continue to support that—is the least that they can live on. If
the household in question is a couple, that situation is even worse,
because the gap in income would be even larger. If they have more than
five children, the gap would be larger
still.

Returning
to the argument about employment, we all agree that it is desirable,
where households are able and where they are in a work-search category,
for people to go into employment. If they cannot find work, however, it
seems a little odd, as we have discussed with housing costs, for those
families to seek to avert the impact of the cap by moving from higher
housing-cost areas to the north of England—Bradford, as in the
example, or Liverpool—where work opportunities are even fewer
than in London and in the south-east. In my experience, the
overwhelming majority of households that are physically capable of
work, and for whom work can be made to pay through child care, want to
work, and they want to look for
jobs.

I
want to share one or two examples of real households that I know. I
have swapped some of the personal characteristics, so that they cannot
be identified, but they are real people. Mr and Mrs B have four
children, and they have been placed by the local authority in what is
called settled accommodation. They were homeless, and they were then
offered accommodation that requires them to pay market rents for three
years, and, after those three years, their rent gradually declines. Mrs
B and two of her children suffer from sickle cell disease, and she is
unable to work. Mr B, who is a graduate, was made redundant two and a
half years ago, and he is absolutely desperate to work. He is engaging
in all the Jobcentre Plus work-search activities, and he came to me
with his CV and was pleading with me about what I,

Column number: 936

as a Member of Parliament, could do to help him back into work, because
all he wants to do is find a job. If he finds a job, he will still need
housing benefit to top up the rent for his settled home, in which he
was placed by the local
authority.

At
the moment, if the cap applied to Mr and Mrs B, their family would face
a shortfall well in excess of £200 a week. They have
already been found homeless and placed in local authority
accommodation, so they are now set on the same path. He will not be
able to pay his rent—nobody would be able to cover his
rent—and he will have to leave London, where he has worked and
where he is trying to find employment, with his four children, two of
whom have sickle cell disease. Where is he going to go? His children
are teenagers, and he would not be able to find a property of an
appropriate size anywhere in the country that did not leave him with an
income shortfall. That is certainly the case according to my analysis.
His rent for a three or four-bedroom private sector private property
would have to be less than £120 a week. If somebody
could find me a three or four-bedroom property for less than
£120 a week, I would recommend it to Mr and Mrs
B.

Mrs N has
four teenage children, who will all be sitting public exams when the
cap applies. Mrs N was also homeless and she was placed in temporary
accommodation by the local authority, where she has been for six years.
She is expected to remain there for at least another three years
according to the points that she has, and she has a rent liability in
local authority obtained private accommodation of £600 a week.
She has severe osteoarthritis and severe depression, which in many
weeks renders her unable to leave the house. She will be affected by
the cap. Her husband was in employment, but sadly he died last autumn,
so she is widowed and is now stuck.

Mrs Miah is
another example, from a Bangladeshi family of the kind who will
frequently be affected by the cap. She has five children, two of whom
are below school age, and she was also widowed last year. She lives in
a council flat, which is the cheapest form of accommodation that anyone
can find, with a rent of £130 a week. The cap on her income will
mean that the shortfall on her rent, let alone on her council tax, will
be £65 a week.

We have
dozens of examples of such people, who in many cases want to work, have
tried to work, have been in work and are stuck through no fault of
their own. It is not surprising that criticism of the way in which the
cap works is pouring in from just about every quarter. We would expect
criticism to come from Shelter, the Child Poverty Action Group,
Barnado’s, the Children’s Society and other expert
organisations which have some idea of the people with whom they are
dealing and what the implications will be. We were surprised to see the
criticism from the Centre for Social Justice, which was published last
week. The CSJ, which is such a cheerleader for universal credit and the
Government’s plans, is concerned that the benefit
cap

“will
bring hardship to as many as 50,000 large families who will have the
rug pulled from under them overnight. The impact of the average
projected loss for such families of £93 a week could be highly
damaging, and for families who are predicted to lose much more, it is
likely to be devastating. Giving such families tailored transitional
support through initiatives like the Work Programme will mitigate some
of the damage, but the Government should think again urgently about its
implementation plans for the full benefit cap.”

Column number: 937

In addition,
the Mayor of London has made clear his deep concerns that the cap
disproportionately applies in London because of higher housing costs.
He, too, wants changes to be made to the cap before it has the kind of
damaging implications about which he has also warned for the housing
benefit cap. We discussed that at Christmas, and he and his researchers
helpfully advised us that the housing benefit cap would cost more in
additional homelessness and temporary accommodation costs than it would
save.

Those are
some of the reasons why we believe that the benefit cap is
fundamentally misconceived and unworkable. Amendment 232 would require
the Government not to apply the cap unless a reasonable offer of work
has been made. The Government—again, in response to my hon.
Friend the Member for Stretford and Urmston—stressed the
centrality of encouraging people into work where possible. I could not
agree more, but if a person such as Mr B desperately wants to work and
is desperately searching for work, and is complying with every single
requirement that the Government and Jobcentre Plus set—and has
not been sanctioned for being in error or for not showing themselves
keen to be employable—but still cannot find a job, why would the
benefit cap apply to them? If the Government are so confident that the
Work programme and Jobcentre Plus under their stewardship will deliver
employment opportunities, surely it would be extremely easy for them to
accept the
amendment.

Charlie
Elphicke: The hon. Lady expresses great concern for
London. However, I believe that 69% of Londoners support the cap, which
does not bear out her argument.

Ms
Buck:I am not sure what the hon. Gentleman means
by that. People have not been tested on whether the cap will end up
costing more money, creating a cut-off penalty and forcing significant
numbers of people into homelessness. Do they think that it is right
that 90% of the people who will be affected by the cap are currently in
work-search categories? The public assumption on this is that large
numbers of people—and there are some—simply choose not to
participate in work-search or take on any employment because it is
always better to be on benefit, which, in terms of comparable family
size, is wrong. It is right that we should be informed and advised by
public opinion, but to make public policy on that basis when the policy
itself is so flawed would be a serious
error.

Amendment
235 requires that the cap should not apply to people who have been made
redundant or who have had to leave work to care for a child. Shelter
and many other organisations that have been making representations on
this point say that this is a particularly harsh measure to apply to
households in which somebody has been in work and then lost their job
through no fault of their own. They are subject not simply to the
trauma of unemployment and reduced income but to the associated
disadvantages that will accrue if the cap
applies.

Harriett
Baldwin (West Worcestershire) (Con): Would not amendment
236 create a perverse incentive for someone to leave work to care for a
child in the way in which my hon. Friend the Member for Redcar
described in relation to a previous
amendment?

Column number: 938

Ms
Buck: No, it would not because the amendment would provide
that people were exempted from the cap only if they were made redundant
or they left work to care for a child in a way in which Jobcentre Plus
recognises. We have already discussed in Committee a whole range of
sanctions that apply to people who leave work without reasonable cause.
If we have confidence in that sanctions regime, it should be enough to
cross-reference it with the benefit cap. Clearly, we are not saying
that none of those investigations should apply. They apply in normal
circumstances and they should also apply if people fall foul of the
cap. We know from the statistics on jobseeker’s allowance that
the vast majority of people—90%—who lose their job and
claim JSA return to work within a year. In fact, a large majority tend
to do it much more quickly than that. In the case of people who are
made redundant or who lose their job through no fault of their own, the
cap will take what will be, in most cases, a temporary period of
unemployment and turn it into a catastrophe in which many people lose
their homes and are plunged below the poverty
line.

Ian
Swales: The hon. Lady talks in her amendment about a
prescribed period. Will she say more about how she sees this amendment
operating? For example, if someone is made redundant, how long would
the exemption
apply?

Ms
Buck: I have already cited the statistics for
jobseeker’s allowance. We know what proportion of people who
have lost their job and make an application for JSA stay out of work. I
expect that this is technically difficult—more work needs to be
done on the clause. However, as this entire benefit cap is so deeply
technically deficient anyway, I am not sure that it is any more
difficult than anything else we are being asked to consider. Through
the amendment, we want to ensure that what, in many cases, is a
temporary period of unemployment does not result in people plunging
below the level they need to live on, in some cases by hundreds of
pounds, and, as a consequence, losing their
home.

11.45
am

Harriett
Baldwin: Will the hon. Lady confirm that redundancy is
often accompanied by a redundancy lump-sum payment? How would her
amendment address
that?

Ms
Buck: In the same way that existing benefit rules treat
redundancy
payments.

The
amendment is specifically designed to get the Government to understand
and recognise that the cap is such an excessively punitive measure to
apply to unemployed people that we need to find some way of offsetting
it. People on lower incomes regularly move in and out of employment.
That is one of the characteristics of people on the margins of the
labour market. What we should be doing—this is the element of
Government policy that we always agree with and support—is
trying to smooth that transition as much as
possible.

Universal
credit is designed to blur the distinction in the benefit system
between being in and out of work. It is designed to ensure that people
can move in and out of work, take a few extra hours or drop a few hours
without its having a dramatic effect on their
income.

Column number: 939

The overall benefit cap cuts right through the middle of that argument.
It creates cliff edges and makes a temporary period of unemployment a
catastrophe. It should be possible to change that with some additional
work. The Government have often promoted the bookcase analogy. Further
details and regulations have yet to be explored in so much of the
universal credit system. It should be possible to find a way to address
the
provision.

Amendment
237 would exempt people not subject to the work-search requirement at
any given time. As I said earlier, 4,850 of the 50,000 households
currently liable to be caught by the cap are not in work-search
categories: nine out of 10 households caught by the cap are not
currently in work-search categories. It is an extraordinary state of
affairs for the Minister to stand up, as he has done several times in
this Committee, and rightly defend the exclusion of other elements of
the sanctions regime, such as households with children under five, yet
apply this cap to exactly the same group of people. It is essential,
therefore, that those who are not in work-search categories should not
to be caught by the cap, although the number of people in work-search
categories will be a moving
feast.

Amendment
238 would exempt those households for which work does not pay because
of child care costs. Again, it would be extremely difficult to make
work pay for families with large numbers of children. The Government
have made that worse by reducing the child care tax credit as we move
towards universal credit. The imposition of the cap would cut in half
the household income of a lone parent going into work, because of the
way in which child care tax credits are currently assessed. A lone
parent with four or five children, particularly if one or more of those
children are under five, would have no means whatsoever of escaping the
cap, because those children could not be placed in a child care
environment covered by the child care tax credit, or its
successor.

Surely
it is fundamental to the operation of any benefit cap designed to
incentivise people into work, as the Minister has said, to make work
pay in all those circumstances. Surely the Government do not expect
families with children—particularly lone parents, because they
are most likely to require child care costs—to go into
employment, to take a job offered by the jobcentre, if they find that
they are, in some cases, hundreds of pounds worse off in work because
there is no child care support. A family will not be able to pay for
themselves to go into work, and this is the central point: if
child-care costs were covered, that would significantly erode the
savings that the Government are assessing.

Amendment 236
seeks to prevent a couples penalty from applying, when it could become
advantageous for a family to form separate households. Couples have a
higher benefit entitlement than single people. If a couple
with a higher benefit entitlement find that the entitlement and rent
costs are in excess of the benefit cap, the obvious thing would be for
the family to form separate households. A husband or wife may form a
household with some of their children, or some adult children could
leave the family and set up homes on their own. As well as meaning
additional expenditure for the Government, in terms of their social
agenda, it would be undesirable for families to seek to do that,

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because it cuts right across everything that the Government have said
about wanting to encourage couples to stay together.

Regulations
have slightly caught up with amendment 244, and I look
forward to the Minister telling us more about how he sees the issue of
families going into work, in terms of the transitional period before
universal credit applies, and afterwards. How will a household be
assessed on the work that it does and the income that it achieves from
work, and how will the cap interact with working households?
Commentators who have looked at how all the elements of universal
credit—and working tax credit, in the transitional
period—interact with the cap are extremely anxious about the
measurement and how the Government will assess families going into
work, because of the step change that is introduced into the system.
The step change, for those families who are on the cap, cuts right
across universal credit and the smooth line of additional income as
families increase their hours. If the Government are planning an
earnings threshold that is, for example, 24 hours of work for an
individual on the minimum wage—roughly the equivalent of
£7,500 a year—the cap will apply to fewer people, and
those affected would be on the edge of work. What it means is that as
people move in and out of employment and as their hours rise and fall,
the cap could apply one week to a working household, but the following
week, somebody in that household could escape from work, sometimes
through no fault of their own. It might even be that income from the
minimum wage increased, and people might be caught as a
consequence.

The White
Paper stressed that it should be financially rewarding for families to
work additional hours. Paragraph 20, under “Earnings
Incentives”, states that universal credit will mean that it will
be

“financially
rewarding for a lone parent to work 15 hours per week, or 17 hours per
week (both of which would not have been financially rewarded under the
existing system which only recognised 16 hours per
week)”—

so,
the existing system creates a step at 16 hours. However, that smooth
line will no longer apply for families who have more than four
children, and it will not apply where families have high rent or a
non-DLA disability component. In some cases, people will find that they
will be capped if they work fewer than 16 hours, and
“de-capped” if they work more. Therefore, if their income
fluctuates, they will have serious problems in managing their
income.

As paragraph
19 states:

“Establishing
a single withdrawal rate, and eliminating the hours rules currently
present in Working Tax Credit, has the potential to create a much more
flexible labour market. Workers will be able to work the number of
hours that most suits their needs and those of their employer, without
being constrained by the structure of the benefits system. Employers
will find that their workforces become more flexible and open to
opportunities for
progression.”

Again,
the proposals break that commitment.

In the case
of a couple with children, moving to 24 hours work from 23
hours on minimum wage would mean that they become entitled
to £47.98 a week in working tax credit, and that they escape a
benefits cap of £95.21, which would otherwise apply, as their
benefit income would otherwise have been £595.21. However, an
increase in net income of £148.29 for an extra hour of work
becomes a fall of £148.29 if the

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hours are reduced, as capping would be applied once more. There is a
cliff edge in the system that, perversely, will apply only to the
50,000 households, the larger households, the families with more
children.

The system is
full of anomalies, and people in lower paid jobs will therefore be hit
by the cap, while those working the same hours but on a higher rate of
pay will escape. How will this work for the self-employed? Net profit
for the self-employed is calculated on a different basis. It is often
adjusted later in the year. If the cap is applied on a weekly basis,
how will this have any interaction with households whose earnings are
calculated on a different rota?

Finally, we
seek in amendment 246 to include in the Bill a range of the benefits
that would be exempt from consideration for the universal cap. Those
benefits interact with the earlier point about families being exempted
if they are not in work-search categories. I particularly want to
stress the importance of people with disabilities. Disability living
allowance has been mentioned as a benefit that would not be included in
the calculation but there are other people with disabilities on
employment support allowance, carer’s allowance, attendance
allowance and so forth who would be caught by the cap unless this is
spelt out more
specifically.

As
well as all those perverse incentives and difficulties in workability,
there will be an impact on the local authorities that have to make the
decisions to reduce housing benefit, because it will be housing benefit
that will be cut in all these cases. The benefit cap, while being a
simple wheeze at conference, with all the elements that attract people
because they understandably object to the rent amounts they hear
mentioned, will have all kinds of unexpected consequences. It is deeply
punitive. It is hard to see how it will work, and it will result in
thousands of people losing their homes when they lose their jobs. It
will create new pressures of homelessness and mobility, which I am sure
the Government do not intend. We are on the Secretary of State’s
side. We are on the Deputy Prime Minister’s side. We believe
that the benefit cap is unwelcome and unworkable, and that it will not
save money. I look forward to the Minister’s
response.

Stephen
Timms (East Ham) (Lab): I, too, am pleased to see you in
the chair again this morning, Mr Gray. I rise to add briefly to the
powerful analysis set out by my hon. Friend the Member for Westminster
North and to speak specifically about amendment 244 with the aim of
clarifying how the Government intend to implement the exemption from
the benefit cap that was promised in the case of working households.
Initially the Government made it clear that the exemption will be for
those who qualify for working tax credit, which in the case of a couple
with children is when they work between them more than 24 hours a week.
That is the idea that is picked up in the wording of 244.

The problem
is that that version of an exemption will not work in universal credit.
It will not work because the Government will not know how many hours
couples are working unless that information was collected alongside
PAYE data in the real-time system for PAYE data from employers being
implemented by HMRC. It would be difficult and a large burden on
employers to collect hours data alongside the PAYE data. Indeed, the
Minister rightly made that point, and it is confirmed in some of

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the notes that have been sent to us by the Department that the exemption
will not be based on hours for that
reason.

So
what will the replacement test be? The Minister suggested that the most
likely test would be an income proxy for the 24 hours per week working
test. That would be the minimum wage for 24 hours a week, which is
£142.32 a week or just under £7,500 a year. The
proposition appears to be whether the income is above or below that
level. If it is above, the benefit cap will not apply; if it is below,
the cap will apply. We can all see roughly how that would
work.

12
noon

That
version of the test has a significant advantage over the hours test, in
that it is more generous. Everyone exempted from the benefit cap by
exceeding the hours threshold will certainly be exempted on the pay
threshold, and quite a few people who would not be exempted from the
cap if it was an hours test would be exempted on the basis of a pay
test. The reason is obvious; quite a few people working fewer than 24
hours a week will nevertheless be earning more than 24 times the
minimum hourly rate because their hourly rate of pay is above the
minimum. Nevertheless, there is a significant problem with such a
test.

If the
exemption is defined on the basis of pay it will, as my hon. Friend
said, introduce a whole new raft of cliff edges, perverse incentives
and penalties of exactly the kind that the Government have said they
want to eradicate through the introduction of universal credit. The
benefit cap creates a multitude of peculiar and damaging features that
do not exist under the current system that will undermine the new
system if the benefit cap is implemented as the Government seem to
intend.

To illuminate
the matter, I have four questions for the Minister. He has indicated
that he envisages having an income proxy for the 24 hours a week test.
First, will the test be applied to all income or just to earned income?
Secondly, assuming that the test will be applied monthly along with the
universal credit payment schedule, will it take account of seasonal
earning variations? If so, how? Or will it be strict and test income
for each month separately? Thirdly, if the test is to be based on
earning, will it be applied to gross or net earnings?
Fourthly—my hon. Friend has already raised this point—how
will the test be applied to the self-employed, for whom monthly
earnings cannot be calculated in real time?

The answers
to those four questions will determine precisely which new cliff edges,
perverse incentives and penalties will be introduced. There certainly
will be cliff edges, perverse incentives and penalties, but we will not
know precisely what they will be until we have the answer to those
questions. I hope that the Minister can answer them.

As we pursue
the matter, it will become clearer why there is a dispute within the
coalition about the benefit cap. It was reported over the weekend, as
my hon. Friend said, that the Deputy Prime Minister is at loggerheads
with the Chancellor, with the Deputy Prime Minister opposing the cap.
Perhaps the Minister will shed some light on that in a few moments and
tell the Committee whether we are correct, but it seems that the
Chancellor insists on keeping it. However, according to reports, the
Secretary of State agrees with the Deputy

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Prime Minister and is at odds with the Chancellor. We did not get much
of a sense from the Minister about whether he agrees with the Secretary
of State or the Chancellor, but he appears to be taking the
Chancellor’s line.

The analysis
that we are setting out may explain why the Secretary of State
disagrees with the benefit cap. Listening to an earlier intervention by
the hon. Member for Dover, I reflected that that opinion
survey—admittedly it was of only three people: the Chancellor,
the Deputy Prime Minister and the Secretary of State of Work and
Pensions—appeared to divide two to one against the benefit cap,
which is rather different from the figures cited by the
Minister.

Charlie
Elphicke: The right hon. Gentleman tempts me to point out
that the opinion polls, by ICM and YouGov, showed pretty much the same
thing—that a majority of Labour voters support the benefit cap
as do nearly 80% of Liberal Democrats and 90%-plus
Conservatives. Does the Labour party support a benefit cap in
principle—yes or
no?

Stephen
Timms: The hon. Gentleman has not told us whether the
sample that was polled in those surveys included the Secretary of State
for Work and Pensions. We are not at all sure. From the reports last
weekend there appears to be a 2:1 split against. As I go on, the hon.
Gentleman will understand why the Secretary of State apparently does
not agree with the benefit caps.

Let me give
an example of the problems that this will introduce into the system.
Like my hon. Friend, I am indebted to Gareth Morgan, from Ferret
Information Systems, who has done the modelling to investigate this.
Let us assume that the exemption from the benefit cap is for a couple,
who between them have gross earnings greater than 24 times the hourly
national minimum wage each week. The couple have four children, one
person is in work and the couple are renting privately a three-bedroom
house in outer south-west London, paying the local housing allowance
sum for that area. If one person works 20 hours a week, earning
£10 an hour, the couple’s earnings will take them above
the threshold and the cap will not apply. They will have a household
income of £747 a week.

Suppose that
the rate of pay falls from £10 an hour to £7 an hour,
which is a drop in earnings of £60 a week. That
household’s weekly earnings will now be below the threshold, so
the benefit cap will apply. A sharp fall in earnings will be
transformed by the cap into a catastrophic drop in income, and the
household income will fall to £640 a week, which is a drop of
more than £100 a week. The earnings go down by £60 a
week, but the income goes down by £100 a week, because the cap
suddenly comes into play.

The Minister
may be taking his inspiration from the New Testament. Luke’s
Gospel, chapter 19, verse 26
states:

“I
tell you that to everyone who has, more will be given, but as for the
one who has nothing, even what he has will be taken
away.”

That appears to be how
this mechanism will work. I approve of the Minister’s taking his
inspiration from the New Testament, but he has got the wrong end of the
stick about what that parable meant. We saw during the

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recession that the tax credit system cushioned household income from the
impact of reduced earnings. The benefit cap will have precisely the
opposite effect, amplifying the impact of a reduction in earnings and
making things considerably worse.

I do not
imagine that that is what the Minister intended, but that is what the
benefit cap will do if the exemption for working families is applied in
the way he has suggested to the Committee. In the example I have given,
on top of a drop in earnings the household will suffer a cut in benefit
of more than £90 a week. None of that includes child care
support; we do not yet know how the Government intend to support child
care in universal credit. It appears, however, that child care support
will be included in the benefit cap, so the loss might be substantially
more. I am looking forward to seeing the new clause on child care
support that the Secretary of State has promised to give us before the
Bill leaves Committee.

If the
household in my example suffers a further drop in income to the minimum
wage rate of £5.93 an hour, the earnings fall is in total just
over £80 a week but the benefit cap hits harder still. The
benefit forfeit in this case is £106.53 a week and the capped
weekly income falls to £618.93—an income fall of
£130 a week—which is an even more dramatic amplification
of the loss of earnings.

It is clear
that if the Government proceed as they have indicated, we will end up
simply with a mess. Ferret has modelled the impact of a test based on
hours, but it has concluded that a test that is based on pay, as the
Government have indicated it will be, will make matters worse still. It
points out that the problems of some people who fluctuate around the
limit—a point also raised by my hon. Friend the Member for
Westminster North—is that one month they will hit by the cap,
the next they will not, and the one after that they will.

The most
extreme example that Ferret has modelled is, again, somebody in the
type of household I referred to, who works 20 hours a week. If their
rate of pay is £7.12 an hour, their income will be £733.
65; they will be outside the cap. If, however, their rate of pay falls
by 1p an hour to £7.11 an hour, suddenly the benefit cap will
apply and their income will fall to £642.16. That is a fall of
more than £90 a week because their earnings have fallen by 20p
in the week. That is how the test will work. That is far worse than the
problems in the current system. The benefit cap is introducing dreadful
new problems that are far more severe for individuals than the problems
in the current system.

The
Government have made the eradication of such problems one of the main
arguments for introducing universal credit. They might argue that odd
cases such as the one I have described will be very unusual. However,
the disincentives in the current system do not affect that many people,
either, yet the Government have made removal of those odd features one
of the principal arguments for universal credit. The truth is that
universal credit helps remove cliff edges, perverse incentives and
undesirable penalties, but the benefit cap is going to reinvent far
worse ones and insert them straight back into the system. I imagine
that is why the Secretary of State opposes the benefit
cap.

This
is a mess; the legislation is half baked. At the very least it needs to
be far better thought through.

Column number: 945

Sarah
Newton (Truro and Falmouth) (Con): Although I can
understand the right hon. Gentleman’s desire to make a big party
political point, surely this is just Parliament doing its job? At least
in this new Parliament, Back Benchers from all parties are able,
through the proper scrutiny of legislation, as is going on here, to
reflect on analysis being done outside this place and urge the
Government to take it on board and sort out the problems and unintended
consequences affecting this group of 50,000 families, so that the
system can be
improved.

Stephen
Timms: I am grateful to the hon. Lady; that is exactly
what we are doing. We hope that we are going to hear in moment from the
Minister that he agrees and is going to do something about this issue,
although I fear we may not. I hope the hon. Lady will urge the Minister
to make changes
accordingly.

Charlie
Elphicke: The right hon. Gentleman is clearly scrutinising
the legislation carefully, but does he think the principle of the
benefit cap is
right?

Stephen
Timms: My worry is that the Government’s proposal
is simply unworkable for the reasons I have set out, and because of the
bizarre effects it will interject into the welfare system. I read
briefing note No. 5, which the Department sent to us last week. It sets
out the core objectives for universal credit, which are designed to
simplify the benefit
system:

“In
order to help households understand what money they receive and how
choices over work affect it, the universal credit will be simpler and
will work on a single system of disregards and one taper…It
supports work incentives directly by ensuring that individuals can keep
more of their income from work but also by simplifying the system and
providing more certainty about what people will receive in
work”.

I
agree with all that. I also agree that universal credit will have some
of those advantages, but the benefit cap, in the form the Government
are arguing for, will unfortunately undo a large part of those
benefits.

George
Hollingbery (Meon Valley) (Con): Given that the right hon.
Gentleman has, in effect, confirmed that he is for a benefit cap and
that he did not take the chance to deny as much, can he explain for us
how he would treat it? Would he increase the level of the cap? Would he
exclude rent from it? What would his solution be to that
dilemma?

12.15
pm

Stephen
Timms: It is absolutely clear—the hon. Gentleman is
perhaps tacitly accepting this—that the cap is unworkable as
currently proposed. I was about to say that there is no easy solution.
Much more work is certainly required before the proposal proceeds. We
understand that the Chancellor is sticking to his insistence that the
proposal should be implemented, and I am afraid that it will create all
sorts of serious problems. I am particularly keen to know the
Minister’s answers to the four questions that I set out earlier,
because that will illuminate the effects of the
cap.

On
this occasion, however, I must say that the Secretary of State and the
Deputy Prime Minister are right, and the Chancellor is wrong. The
problem is that the proposal is difficult and complicated. The
Government are rushing in and making dramatic claims about the
improvements that they will bring about, and they are saying that they

Column number: 946

can create the IT system in time to implement the proposals. However,
they have not worked out the detail, and they have not done the
background work properly, and if the Government stick to their guns, we
are heading for
trouble.

Kate
Green: I will be brief, because I want to raise one issue
only, which is in addition to the many important points made by my hon.
and right hon. Friends this morning. My point relates to the amendment
on couples. I am concerned that we are in a situation where, as my
right hon. Friend suggested a few moments ago, yet another disincentive
or penalty for couples is being introduced into the benefit system.
That may explain, of course, why the Secretary of State is so
unenthusiastic about the proposals. He has made great play of the
importance of family stability. He has emphasised repeatedly, over many
years, the significance for children of, wherever it is possible, being
brought up in households with both parents, and I had understood that
one of his personal objectives for his benefit reforms was to promote
and support parenting in couples, which is what he perceives to be in
the best interests of
children.

A
benefits cap is surely yet one more inducement for couples to separate
and to live separately. It enables them each to take their own benefits
allowance up to the amount of the cap without suffering any penalty. I
am curious to know, therefore, what we think the likely impact of this
measure on family structure, stability and breakdown will be. I am so
curious that, in a written question at the beginning of this year, I
asked the Secretary of State what assessment had been made of the
likely effects on family structure and breakdown. It took until the
middle of March to get an answer, but, on 14 March, the Minister of
State responded to me, and he told me that no assessment had been made
by the Government of such an impact. I find that surprising for a
Government that put family stability and couple relationship so much at
centre stage in their approach to policy in general, including welfare
reform.

We
can be concerned, therefore, that while it may be quite difficult to be
confident that couples will actually separate as a result of the
benefits cap, although it could be one of the many unintended
consequences of this flawed policy, it will certainly make it less
likely that some couples will form stable relationships, which are
those that could be very much in the interests of children. For
example, a widow with three children forming a relationship with a
widower with three children would lead to a substantially large family,
and they will have each arrived in that situation through absolutely no
fault of their own. Inevitably, with six children, one of them will be
at home, taking care of the children, and if the other one, through no
fault of her or his own, loses their employment, that family is likely
to be vulnerable to the imposition of the benefits cap. When jobs look
potentially uncertain and people may not feel confident about the
stability of their employment, that is likely to be a factor that
people consider when looking at whether to move in together and combine
their household finances. The combining of household finances is,
surprisingly, a significant factor that women in particular consider
when they form new relationships. I am interested in the lack of
thought that Ministers, as of the middle of March, appear to have given
to this issue.

The Minister
said in his written response to me that the Government were looking at
ways to ease the transition

Column number: 947

for families and provide assistance in hard cases, so my question this
morning is, in what way is he looking to provide assistance in hard
cases? He might think that this is entirely a problem of people meeting
their housing costs and he will point yet again to the discretionary
housing payment to bail families out. As we heard in earlier sessions
on the Bill, that pot of money is being stretched very far. Families
will not have concerns only about housing costs, so will he be clear
about what assistance he proposes for hard cases affected by the
benefit cap and, particularly, how does he intend to use such measures
to ensure that family stability is protected? Will the proposals
facilitate the stable family homes—preferably, in the Secretary
of State’s view, those with parents in a stable couple
relationship—to which the Secretary of State has turned his
attention?

Sheila
Gilmore: Discussing a benefit cap in the context of public
opinion will always be tricky. If I ask many of my constituents in a
bold sense, “Do you think that anybody should be getting benefit
x?” or, “Do you think that people who are working should
be better off than those who are not working?”, I know what the
answers will be, but when I discuss individual cases and circumstances
in which they, their friends or their relatives may find themselves,
the situation is different. That is the difficulty with legislation and
provisions of this kind. However easy it is to say how unfair something
is in general, it is very different when we are dealing with real
people, families and
households.

There
will always be circumstances in which it is genuinely very difficult to
realise the general desire to make, for example, work pay or to ensure
that benefits do not seem too high relative to work, unless we say that
simply because someone has a particularly large family or particularly
difficult circumstances, they must get less money than we, as a
Parliament, have decided they should have. Remember, the cap is not
just a housing benefit cap, but an overall benefit cap, and the
elements in benefits will have been based on what was felt to be
appropriate to meet a family’s needs. There are payments for an
individual, a couple and there are elements of benefits for children,
because it is recognised that there are clear costs in having children.
We could all argue about, and there are debates on, whether benefits
when taken in their separate elements are enough for people to live
on.

We
might all feel that in some circumstances people should not have very
large families, although I doubt if people would actually say that.
People may have large families for cultural reasons, and we have seen
huge changes in family size in this country over the past
100 years. I do not think that we will return to those very
large families, but nevertheless there are large family groups. A lot
of them are blended families made up of people who came together after
a relationship breakdown rather than those with children whom a couple
had together as a single family. We have all encountered large
families, and we might find them wholly inappropriate. I remember the
local paper making a big fuss about a family in Edinburgh who had
11 children. The parents were not working and the paper
worked out how much benefit they were receiving. The council had had to
knock two houses into one for them, and that was thought to be grossly
unfair. Nevertheless,

Column number: 948

such families are there, so how do we deal with them? The reason that we
end up talking about housing benefit as if it was just about high
housing costs is that it is probably the most flexible end of the
overall benefit that may be capped. If we say that the amount for
children, an individual or a couple is in relation to their needs, they
will either have to cut back on those needs in terms of food and
clothing or they will have to cut back on their housing costs. To cut
back on housing costs means either not paying their rent, and there are
consequences of that, or finding somewhere else to live, which may or
may not be easy. That is why we end up talking as if this is just about
housing.

Where people
live has a lot to do with their family background and where they were
born and brought up. Even in cities such as London, which has such huge
disparities of wealth, we can find a mix of people within a single
council area. There has always been a social mix, and that is a
positive thing. Houses worth some £1 million stand cheek by jowl
with affordable homes. In Edinburgh, we have been making an effort to
build affordable housing all over the
city.

The
Chair: Order. I am sorry to interrupt the hon. Lady, but
perhaps I could make a couple of quick points. First, the question of
housing more accurately comes under the next group of amendments.
Secondly, I have allowed a fairly general stand part debate. We should
be discussing exemptions rather than the principle of the cap itself
and, therefore, I will probably decide not to allow a stand part debate
later on. Perhaps the hon. Lady might like to bring us back to the
particular group of amendments under discussion, bearing in mind that
housing comes into the next
group.

Sheila
Gilmore: Specific housing issues come up in the next group
of amendments, but clearly there are overall issues about how the
proposed cap will have an effect. I understand why the Minister wants
to have this empty book case and to come back to a lot of these issues
later, but I would like to draw his attention to amendment 246, which
proposes to list some specific exemptions in the Bill. If there is a
consensus that certain kinds of benefit would not form part of the cap,
it would be advantageous for them to be listed. It does not prevent the
flexibility of adding to or changing those at a later date, but it
would reflect an overall consensus on what types of benefit should not
be part of the cap. Things such as disability living allowance and
carers allowance are listed and are exactly those sort of benefits to
which the cap should not
apply.

Harriett
Baldwin: Does the hon. Lady accept that in the paperwork
that we have already had from the DWP, the disability living allowance
and its successor are exempt from the cap. That is an important message
to put on the
record.

Sheila
Gilmore: With all due respect to the hon. Lady, we have,
at this stage, only a statement that that will happen. We have not yet
reached the stage of agreeing regulations. If there is such a high
degree of consensus, I do not entirely understand why there is such a
resistance to including these benefits at this stage. For example, if
there is consensus on benefits such as the disability living allowance,
why not list them because it would be of considerable advantage to the
people who are worried. We have learned a lot in the course of this
debate about

Column number: 949

people’s worries and whether they are justified, and who is
causing people to be anxious. If there is agreement and overall
consensus, we should spell it out at this stage because that could
reduce anxiety. Those who fear that they might be affected would
benefit from having this now spelled out. Where there are other issues
over which there is not the same degree of consensus, they will still
be debated at the time of regulation. I do not understand why there is
such a degree of resistance to including such an
exemption.

Harriett
Baldwin: A document was published on the DWP website last
Friday that spelled it out. I would submit, therefore, that it has been
spelled
out.

12.30
pm

Sheila
Gilmore: A document on the DWP website is not legislation,
and it is not yet regulation. It is simply a statement of intent, and
it is a statement of intent that I welcome. If it is a statement of
intent, and if we all agree with it, I do not understand why including
it in the Bill is so
difficult.

The
other clear theme, as the Minister said when he addressed the previous
group of amendments, is that the main reason for having a benefit cap
is to ensure that work pays. That is the most important reason why the
Government want to introduce an overall benefit cap. In that context, I
urge the Minister to look carefully at amendment 237, which would
address the situation of people whom the system has decreed do not have
to seek work. Such people, for the most part, would either have
children under five or be in the support group of ESA, as it currently
is, or its successor under universal credit. Having decided that
someone with such severe health or disability needs does not have a
work requirement, it is not clear why that person should be covered by
a cap that, as the Minister has said, is intended to encourage people
to seek
work.

On
the basis of his own statement on the purpose of the benefit cap, I
urge the Minister to look in particular at amendment 237. If he is not
prepared to agree to the amendment, he should at least give some
indication of his views on future regulations and how they might be
drawn
up.

Chris
Grayling: As you have pointed out, Mr Gray, we have had a
lengthy debate on the scope not only of the amendments, but of the
clause as a whole. I will begin my remarks, therefore, by following
your guidance and saying a little about the clause as a
whole.

The
Chair: Order. I apologise for interrupting the Minister,
but, further to my remarks a moment ago, representations have been made
to me that one or two members of the Committee would like a stand part
debate. It is quite possible, therefore, that I will allow such a
debate. I suggest to the Minister, therefore, that he might like to
constrain his thoughts and stick to the amendments under
consideration.

Chris
Grayling: I will happily follow your guidance, Mr
Gray.

I
will start with the key question, because it directly affects this
group of amendments. The question was put to the right hon. Member for
East Ham a few minutes

Column number: 950

ago by my hon. Friend the Member for Dover. My hon. Friend asked whether
the Opposition are in favour of the principle of a benefit
cap—yes or no—and, notably, he did not get an answer. We
are left in a state of considerable confusion as to where the
Opposition stand on that
issue.

A
few days ago, I read out a quote from an adviser to the shadow
Secretary of State that appeared in the Financial Times. The
adviser said that Labour supports the principle of a cap on benefits.
That statement has not been repeated today by the right hon. Gentleman,
and I am not entirely surprised. What we have here is a set of what can
only be sensibly described as wrecking amendments. They are not a
series of thoughtful, probing tweaks; the amendments would completely
demolish the principle and substance, and the rest, of a benefit
cap.

Stephen
Timms: Will the Minister comment on the accuracy of the
rest of that article in the Financial Times? The article
explained that the Secretary of Sate and the Deputy Prime Minister are
opposed to the benefit cap, but that the Chancellor supports
it.

Chris
Grayling: Much though I am sure that the right hon.
Gentleman would love to get into a debate about politics, if I am not
mistaken, there is nothing in the amendments or the clause that
describes anything to do with the discussions that take place in
government, and I would therefore be out of order if I were to follow
that path. The reality is that, taken together, the amendments would
totally emasculate the concept and the practical application of a
benefit cap. I can therefore only take it that this is an attempt by
the Opposition to put a marker very clearly into the ground that they
oppose the principle of a benefit cap. I intend to make my remarks in
that
context.

The
basic principle behind all these reforms is that we want to encourage
people to progress into work. The reality is that there is a very
simple principle at the heart of what we are introducing, which is that
there is a point beyond which the state should not continue to provide
financial support. That matters for two reasons: first, it matters to
the message that we send out about the importance of people getting
into work; secondly, it matters to the credibility of our welfare
state.

It does no
service to welfare claimants in this country if they are seen to be
receiving amounts of money from the state that exceed the average
earnings of people who are in work. That encourages, develops, fosters
and grows a narrative that says there is something wrong, and it has
the effect of stigmatising those claimants, which is not right. People
are better off in work, and we should do everything we can to help them
into work. However, it is also important that we have a welfare system
in which the people of this country can have confidence. At the moment,
it is clearly demonstrable that that is not the case. The comments made
by my hon. Friend the Member for Dover about the level of public
support for taking such a measure are absolutely
right.

Ms
Buck: The Minister is rightly discussing the integrity of
the system and people being better off in work. Will he clarify why the
benefit cap will apply to people who are not in work search categories,
when everything else

Column number: 951

we have discussed in Committee in relation to the universal credit and
the existing benefit system includes people who are not in work search
categories?

Chris
Grayling: The reality is that the measure has to apply
across the spectrum. We cannot say, “This type of claimant group
is being cut; this type of claimant group is not being cut.” In
policy terms, we have indicated a number of areas where we would make
exceptions or where we would not include benefits in the benefit cap.
This set of reforms should apply across the board, and we have made
provision for
that.

Today,
we are debating a clause that sets out a framework. It does not specify
any exceptions, and it does not specify any particular benefits to be
included or not included in the cap; it creates the mechanism for this
and a future Government to decide how and at what level to constitute a
benefit cap. The measure does no more than that. However, the impact of
the amendments would be to totally change that. They would write off
significant parts of the welfare spectrum in terms of the people who
would be excluded from these measures. In effect, the amendments would
make it impossible to implement a benefit cap that would be even
remotely credible in the eyes of the public. That is first and foremost
why I cannot possibly accept the Opposition’s
amendments.

Paul
Uppal (Wolverhampton South West) (Con): I am grateful to
my right hon. Friend for giving way. I wanted to wait for
him to make his comments before I intervened. If this Public Bill
Committee is genuine in its aspiration for people to escape from
poverty, an essential part of the Bill and the principle we are talking
about is that people should live within their means. I appreciate the
points that he has made about the message we send out about the welfare
system and how it works. However, if we are genuine in our aspiration
not just to make work always pay, but to enable people to escape
poverty, that is an essential message we should send out in the
Bill.

Chris
Grayling: My hon. Friend makes a valuable point. He has
articulated it very well—better than I could. What he has said
is very clearly on the record. He is absolutely
right.

First
and foremost, my right hon. Friend the Secretary of State made it clear
on Second Reading that we are looking at ways of easing the transition
for families by providing assistance in hard cases. We will provide
more detail as we develop our implementation plans, but the Bill gives
us all the powers necessary for the purpose. We have made it clear all
along that there will be certain exemptions. For example, it is right
to exempt households where the claimant, their partner or a dependent
child, are entitled to the DLA or an equivalent benefit, because we
realise that they have additional disability-related costs.

My point to
the hon. Member for Edinburgh East is this. We know from past
experience that writing provisions into primary legislation means that
future Governments wishing to make changes will be unable to do so.
There is no need to write such a safeguard into the Bill. We intend to
replace the DLA shortly, and the Bill sets out replacements for it. We
or future Governments may

Column number: 952

wish to make other changes to the system, and it would be daft if we
could not help claimants by providing additional support, because we
had written such things into primary
legislation.

I want to
make it absolutely clear that it is right to exempt households if a
claimant, their partner or a dependent child are entitled to DLA or an
equivalent benefit in recognition of the fact that there are additional
disability-related costs. That is a clear statement of intent by the
Government, and I imagine that future Governments of whatever
persuasion would share it. It is the right thing to do. It is also
right to exempt war widows and widowers by not including their benefits
in the cap. We have made it clear that working families entitled to
working tax credit will be exempt, and there will be an exemption for
working families on the universal credit. I shall address the points
raised by the right hon. Member for East Ham in a moment. All those
exemptions, and the detailed criteria for the working families
exemption, will be set out in regulations in due course. The Bill
creates scope for further exemptions, if we or future Governments
consider it appropriate. However, the case for exemptions must be set
against the reasons for needing a benefit cap.

It is
certainly the case that this measure provides some savings, but it is
not primarily a financial savings measure. The primary objective is to
tackle the culture of welfare dependency by setting a clear limit to
what people can expect from the benefits system. It is important that
the system is fair and that it is seen to be fair to the taxpayers who
pay for it. It is not reasonable or fair for households receiving
out-of-work benefits to have a greater income from benefits than the
net average weekly wage for working households. Many working people
have to cope with difficult circumstances, and they have to live within
their means. It is not sensible, nor is it ultimately helpful, to
shield people on benefits from the realities of life by giving them
unreasonably high levels of financial support. To do that would
certainly create a culture of welfare dependency. For that reason, it
is essential that exemptions are kept to a
minimum.

Kate
Green: Will the Minister comment on the matter raised by
my hon. Friend the Member for Westminster North earlier this morning,
which is that average earnings are not necessarily the right comparison
point, even accepting the Minister’s premise, because many on
average earnings will also be in receipt of other in-work financial
support?

Chris
Grayling: I return to the subject of our debate: this
measure requires the cap to be determined by reference to estimated
average earnings, but it does not tie the hands of
Government.

Our policy
approach, and the Government’s clear intent, is to have a cap
that bears reference to average earnings. That is necessary for the
credibility of our benefit system. It is the right place to set the
cap. If Opposition Members believe that we are wrong, and they are
successful in a future general election, the Bill will provide them
with the flexibility to make changes. However, this Administration
intend to set a cap that relates to national average
earnings.

Charlie
Elphicke: I found it noteworthy, particularly in light of
the last intervention, that we have not heard of any case studies on
the effect on the squeezed middle

Column number: 953

householder who earns £35,000 a year—the alarm-clock
strivers who work hard and who ask the question in our constituencies.
“Why should we work hard while others are better off? It is not
fair.”

Chris
Grayling: My hon. Friend makes a valuable point. It was
interesting to note the case study given by the hon. Member for
Westminster North, in which she described someone who was potentially
on the benefit cap but who was paying about £5,000 a year in
rent. That person would have income of £20,000 after rent. That
is more than many people in work receive. It is important that we have
a system that is credible in the eyes of those people who are in work.
If we do not, it undermines the principle of our welfare state in a
variety of different
ways.

12.45
pm

I
remind Opposition Members that local authorities have the power to deal
with individual hardship cases through the discretionary housing
payment scheme, if they so choose. The problem with the amendments is
that the cap would apply to almost no one. Under amendment 232, the cap
would apply only where someone has turned down a reasonable job offer.
That would turn the cap into a form of sanction, which is totally
inappropriate. Why would we limit the cap to a situation where someone
had turned down a job offer? That would be nonsensical. It would
eliminate a significant proportion of those people in receipt of
benefits. Turning down a reasonable job offer is in itself a
sanctionable offence that can lead to the withdrawal of benefits for an
extended period, so amendment 232 is completely
illogical.

Amendment
235 exempts short claims and provides some breathing space during which
people can adjust their circumstances to take account of the cap. We
certainly need to give some thought to that. I have some sympathy with
that but we need to look at issues like that in the formulation of the
detailed application and the way we make this work and how we deal with
short-term pressures. These are issues that will be dealt with in the
regulation-making process. They are not things that need to be written
into primary legislation. People who have been in work recently may be
in a stronger financial position and better able to return to work
quickly. As I have said, the Secretary of State has talked about the
importance of being able to provide assistance in hard
cases.

Amendment
236 is intended to counter any risk of additional couple penalties. I
would simply say that if there is such a risk, I am not convinced that
doubling the cap for couples so that they can get £50,000 a year
in benefits is the best way of dealing with it. As for the couple
penalty, if they break up they still have to pay two lots of rent in
different places. I am not persuaded by the Opposition’s
argument about couples. I do not think we should automatically limit
the cap to households where at least one adult is subject to all
work-related requirements, as proposed by amendment 237, or to link it
to the cost of available child care, as proposed by amendment 238,
because both approaches would undermine the principle of the
cap.

Amendment
244 creates an exemption for couples in work according to the number of
hours worked. The right hon. Member for East Ham discussed that

Column number: 954

amendment, and I will answer his questions in just two moments.
Amendment 246 is consistent with our intention to exempt the DLA and
equivalent benefits, but it includes some other benefits where we do
not think that the argument for an exemption is as clear-cut. The
exemption for the DLA means that in effect we will be exempting
carer’s allowance recipients in households where one member of a
couple or a dependent child is severely disabled and the other member
cares for them. That does not arise in cases where the carer’s
allowance claimant is caring for someone outside the household. Nor do
we think that there is a case for a general exemption for ESA
recipients or people gaining a disability element in universal credit.
These claimants will be exempt if they have additional costs and are
receiving the
DLA.

The
right hon. Member for East Ham asked a number of specific questions
about the details of exemption for people in work. Those questions will
all be answered in the regulations. For now, I will say that my
expectation is that the test would be for earnings and not income out
of work. Seasonal variations would be treated no differently from the
universal credit. People experience variations, which should be
reflected in the way the system operates. We will have to vary
people’s support with universal credit, and that will be no
different. On the question whether the cap will apply to gross or net
earnings, universal credit will be assessed on the basis of earnings
after tax and national insurance and 50% of contributions to pension
schemes, and this will be no different. For self-employed people we
will have to build this on the same rules that we put in place for
handling self-employment through the universal credit. We will have to
do that quite carefully to make sure that we do not create the kind of
disincentive to self-employment that concerns the right hon.
Gentleman.

The reality
is that the cap is all about influencing behaviour; it is not about
creating hardship. If we succeed in influencing behaviour, the number
of cases affected by the cap will be cut to a minimum. However, we will
only influence behaviour if we have a simple rule which people can
understand, and not one hedged about with numerous exemptions that only
welfare rights experts can follow. The simple message to every citizen
of this country as they enter adult life is that there is a limit to
the amount of financial support that the state will provide to people
if they fall on hard times, and therefore they need to adapt their
circumstances to reflect that
reality.

It
is essential to have a welfare state that is fit for purpose, that
provides support to people when they need it and that commands the
credibility and confidence of the public at large. At the moment, as
evidenced by the poll findings referred to by my hon. Friend the Member
for Dover, that is certainly not the case. This mechanism will enable
us to start to rebuild that
confidence.

I
cannot accept the amendments and will, in due course, be commending the
clause to the
Committee.

Ms
Buck: There was a telling intervention by the hon. Member
for Wolverhampton South West about the importance of people living
within their means, with which of course I have a great deal of
sympathy. However, the fact is that family means are determined by the
Government. That has not changed. The means given to people in the form
of child benefit and child tax

Column number: 955

credit remain extant, and the Government have taken that decision about
the minimum that a household should have to live on. Yet the Government
are now changing the rules—in effect, retrospectively, because a
family cannot change its household composition or the number of
children. I will come back to housing costs, but those households are
now required to adjust their means, and often they cannot avoid the
cap.

That
inability, in the overwhelming majority of cases, to take meaningful
action to avoid the implication of the cap is one of things that
worries me most. The Minister glossed over the important amendment on
child care, but it is an important illustration. If a lone parent with
four or five children wishes to avoid the benefit cap by taking
work—I have no doubt that many will—that household will
end up worse off because of child care costs. That flies in the face of
everything that the Government have rightly said is the guiding
principle of universal credit, and I cannot believe that that is their
intention.

We
agree that, if the Government want people to go to work, work should
always pay. Larger households are currently exempt from everything else
in the benefit system if they have children under the age of five, but
members of those families will now be required to go into work and lose
money as a consequence. That is a powerful illustration to which the
Minister did not
respond.

The
measure will retrospectively hit households that already include
living, breathing children who have needs and who need to be looked
after. It will affect 55,000 households with children, so, by
definition, it will involve at least 250,000 people, because the
families affected are largely ones with more children. They are losing
£93 a week on average and, as the Minister has made it clear,
include—bizarrely in my view—the nine out of 10
households not currently subject to work search requirements. I do not
understand that at
all.

On
the one hand, the Minister rightly defends the exclusion of certain
categories of people, such as people on ESA who have been assessed and
deemed unfit for work, or families with children under the age of five.
They are not required to look for work but, on the other hand, in
Committee and elsewhere, the Minister wishes to apply a punitive
benefit cap which, in many cases, as the information we have had from
Ferret and others illustrates, will require those households to move to
avoid the cap. In fact, it will not require them to move to avoid the
cap and to find somewhere they can afford, because there is often not
anywhere they can afford. That is spelled out in considerable
detail.

The
Minister has rejected the idea that households should only be subject
to the extended sanction if they refuse a work offer. I do not
understand that. If we want people to get into work—we want work
to pay—surely people should have the opportunity to receive a
job offer. People in vulnerable households, which often

Column number: 956

include those who are sick or widowed, or deserted wives, should not be
subject to this benefit sanction when no one has offered them a job or,
in many cases, is even looking for a job for them. If those people go
into Jobcentre Plus, they would presumably be sent away. It would say,
“Hang on, you’ve got children under the age of five;
you’re on employment support allowance and are not required to
look for work. We’re not going to look for a job for
you.” Will Jobcentre Plus help those people and find them a job?
I do not think so, because that is not how it currently
operates.

At the heart
of the legislation, we should do everything that we can to support,
advise and incentivise people to go to work. However, where they have
no means of avoiding the benefit cap because they have not been offered
a job and are often not in work search categories, such penalties are
wrong. The scale of the penalty that will apply is so great in both
financial and housing terms that it is wrong. Many of our amendments
are probing amendments, but we will press for a Division on the issue
of a reasonable offer of employment.

Harriett
Baldwin: How does the hon. Lady define
“reasonable”?

Ms
Buck: In the same way that employment is defined elsewhere
in Jobcentre Plus. If people are in a job search category and required
to work, a sanction will apply if they turn down an offer of
employment. It is essential to the integrity of the measure that people
have the opportunity to work, and for that work to pay. On that basis,
I will press the amendment to a vote.

Question
put, That the amendment be made.

The
Committee divided: Ayes 9, Noes
13.

Division
No.
15]

AYES

Buck,
Ms
Karen

Curran,
Margaret

Elliott,
Julie

Gilmore,
Sheila

Green,
Kate

Greenwood,
Lilian

Pearce,
Teresa

Sarwar,
Anas

Timms,
rh
Stephen

NOES

Baldwin,
Harriett

Ellison,
Jane

Elphicke,
Charlie

Glen,
John

Grayling,
rh
Chris

Hollingbery,
George

McVey,
Esther

Newton,
Sarah

Patel,
Priti

Smith,
Miss
Chloe

Swales,
Ian

Uppal,
Paul

Willott,
Jenny

Question
accordingly negatived.

1
pm

The
Chair adjourned the Committee without Question put (Standing Order No.
88).